The cheapest end of the rental market is under-supplied and overly competitive, a deposit alternative service claims.
The provider - Zero Deposit - says just 1.9 per cent of the UK’s rentals are priced under £500 per month, while tenant demand in this price range is the highest in the market.
The provider analysed current rental market stock at each rental price band, looking at the proportion of homes available at each price threshold, as well as the demand for these homes based on the number of total homes that have already had a let agreed.
The 1.9 per cent figure is by far the lowest level of stock of all rental market price bands in the analysis and the firm claims this highlights that those with the smallest budgets face by far the toughest task when it comes to finding a rental property they can afford, let alone securing it.
For those that are able to boost their rental market budget, the middle of the rental market remains competitive, however, demand is lower for properties with asking rents of between £500 and £2,000 per month, while stock levels are also more robust.
Some 26.1 per cent of the UK’s stock costs between £500 to £1,000 per month, while 53.0 per cent of rentals are already snapped up, meaning around half of stock remains available.
It’s a similar situation between £1,000 and £1,500, which accounts for 22.1 per cent of the UK’s stock, while 52.4 per cent of homes are snapped up.
At the rarified range of £1,500 to £2,000 supply is lower, at 16.1 per cent of stock, while demand is slightly higher, at 57.9 per cent.
Zero Deposit chief executive Sam Reynolds says: “Tenants searching for the most affordable rental properties are facing an insurmountable task, as there’s a real shortage of affordable stock and these properties are being snapped up quickly when they do reach the market.
“It’s this market segment that is being forced to heavily compromise on their next home while being under considerable financial pressure to fund the move. Of course, it still remains a challenge for those who are willing or able to spend more, but supply and demand are more equally weighted at the mid-range of the market.”
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With Section 24 and sky high costs is it surprising very few rooms are below £500 a month? I currently have one single room at £490 in one of my HMOs (rent increase due next April) and one single room in another HMO at £500 (rent increase due next June). I certainly don't expect either of those rooms to be available any time soon and if they were to be vacated the new rent would be somewhat higher.
Not just the cheapest end!
One bed flats in Halesowen West Midlands. A few years ago there were always at least seven or eight priced around £425 a month. Now there are none. Last one went at £675 a month. Well done Polly "Bleat" at Shelter, George "Section 24" Osborne and Dan Wilson " stick in your Craw" Generation (Nowhere To)Rent for all you have done for rental availability and affordability. I have two properties just awaiting sale to downsizing elderly couples. Not landlords so gone from the rental market.
All we need now is Angela
" Chaos" Rayner and the rout is complete.
The way it is going this site will be renamed " Landlord Yesterday"
I try to keep my flats below the LHA rate. I had intended to raise the rent of the last flat that became vacant, but I ended up reducing it because only one person was going to occupy it (two double bedroom flat). I wasn't asked to reduce the rent by the tenant, but I did so significantly much to the surprise of the tenant.
London LHA rates are much, much, much higher than in other parts of the country. LHA for a 2 bed in Central London is £1590 a month. In Northumberland it's just under £395. Even the cheapest Outer London areas have a 2 bed LHA of £1100 a month.
For any landlord trying to operate a solvent business in most parts of the country LHA is woefully inadequate. Obviously costs for things like boiler insurance, gas safety checks, licensing schemes, repairs and building materials are broadly similar throughout the country.
I am aware of that, Jo, because I have a house outside London, too. There is a big difference in the LHA rate, but with my business model as it currently is, I don't receive applications from people on LHA - I just use the amount as a guide.
I generally try to put myself in the tenant's place. I know what it feels like to be overcharged and so I prefer to charge less for that reason. It is not because I am well off - an inheritance tax bill of over a million pounds means that I have been in debt. However, I think I have managed quite well - my tenants have paid up.
The policies at the moment - Section 24, frozen LHA and the Renters Reform Bill etc are all designed to get rid of us, so I am afraid that we waste our time when we try to point out their shortcomings.
Ellie - if you had an IHT bill of over a million doesn't that mean you inherited around £3 million. So after whatever nil rate exemption was factored in left you with at least £2 million?
Every penny of my father's money went towards the inheritance tax bill, so I didn't inherit any money at all - and, of course, my father's money was also subject to inheritance tax, as well as his houses.
I could sell the property I inherited, but I am thinking of my family when I die.
I inherited quite a lot of work actually. I have carried out a great deal of maintenance on the properties, responded to tenants' needs all the time etc. I have lived frugally myself - having had to pay inheritance tax as well as income tax etc
What worries me is if Jo thought that I had £2 million pounds what is Labour going to think about our circumstances!
Are they going to misunderstand them and introduce yet more taxation!
Ellie - inheritance doesn't have to be cash. You chose to retain the properties instead of exchanging them for their cash value (selling them). They are still worth whatever they were valued at for probate purposes (probably significantly more now). You could mortgage them if you are under 70 (TMW do a 35 year BTL mortgage at up to 70 years old) or do an equity release scheme. It's your choice to leave the cash in the properties. Most of us don't get given a couple of million quids worth of equity in houses.
Of course that equity will count towards your estate and will be taxed again when you pass unless you have done some kind of tax planning or put it in trust somehow. That's one of the truly evil things about IHT. Taxing the same inheritance multiple times as it passes down through the generations.
I am very conscious of the fact that the property could be taxed highly again when I die, and that is why I am trying to work out what is the best thing to do for everyone. I am considering the impact of the new legislation. Having sitting tenants greatly reduces the value of the property, and let's not forget in the past that tenant's children had the right to inherit the tenancy.
As for my being lucky to inherit the property which is now valued quite highly, I didn't feel that lucky. I had helped my father run his business for many years contributing a great deal to it. I didn't take any money for doing that, and none of my fifty years of work in the past was taken into account by HMRC for the purposes of calculating the inheritance tax.
Ellie - a while ago you said something along the lines of your father wanted to transfer some of his properties to you while he was alive but you wouldn't allow him to because he had worked hard for it. Presumably that was his attempt at inheritance planning and may have saved a significant amount of IHT if the timing was right.
The biggest danger we all have is leaving it too late for tax planning to be effective. I'm fairly rubbish at making big decisions that are irreversible but the three things I am good at is paying as much earned income into a SIPP as possible so it's outside my estate and therefore potentially available to pay the IHT bill, regularly contributing surplus rental income to grandchildren's SIPPs so it is immediately outside my estate and insisting children or grandchildren invoice me properly if they do any maintenance work for my portfolio.
Jo - that is very true. My father wanted to put the properties into my name, and I didn't allow that. The accountant was very cross with me. It was my fault, but the way I saw it was that the rents were the money for my father's retirement and he had worked very hard indeed to buy the houses. I had always been only too happy to help him in any way I could. I thought inheritance is something that should happen when the person dies, not while they are alive.
You sound as though you are doing your very best in your tax planning. Those sound like brilliant ideas - the SIPPs and the invoices from your children and grandchildren.
I am hopeless at making big decisons.
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